The London Stock Exchange (LSE) has expressed optimism that the UK government may move toward reducing stamp duty on share transactions in an effort to enhance the competitiveness of the City of London’s financial markets. Dame Julia Hoggett, chief executive of the LSE, pointed to recent government budget documents as a sign that officials are beginning to acknowledge the potential economic benefits such changes could bring.

Stamp duty on share purchases currently stands at 0.5 percent, generating up to £3 billion annually for the government. However, the levy has faced criticism for discouraging trading activity and limiting investment in UK-listed companies. In the budget released by Chancellor John Healey, accompanying papers noted calls for a cut in the tax and stated that the government would keep the issue under review, balancing the fiscal impact against potential economic gains.

Dame Julia described this as one of the first formal acknowledgments by the government of stamp duty’s role in deterring share trading. She emphasized the importance of the financial industry continuing to make the case that reducing or reforming the tax would ultimately benefit the economy by stimulating growth, increasing employment, fostering innovation, and improving productivity.

Last year, the government introduced a temporary relief by suspending stamp duty on shares sold during initial public offerings (IPOs) for three years, an initiative supported by the Capital Markets Industry Taskforce (Cmit), which Hoggett chairs. While outright abolition of the tax was deemed not feasible at that time, industry stakeholders called for exemptions on pension funds and Individual Savings Accounts (ISAs) to encourage long-term investment.

Healey’s budget also unveiled plans for a new “Starter ISA,” designed to help first-time investors enter the market. This move follows the scrapping of previous proposals by former Chancellor Rachel Reeves to reduce the tax-free cash ISA allowance from £20,000 to £12,000. The introduction of the Starter ISA has been seen by Hoggett as a positive step, opening discussions on how best to incentivize domestic investment in UK equities.

While Reeves had previously rejected initiatives to use ISAs to bolster local investment, the new product may signal a shift in strategy, with the potential to support greater participation in London-listed shares. As the government considers the balance between revenue raised through stamp duty and the advantages of a more dynamic equity market, the LSE continues to advocate for policy reforms that would enhance the appeal of UK capital markets.